##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 For the transition period from ___to ___
 Commission File Number 001-14429
 SKECHERS U.S.A., INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    95-4376145(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)228 Manhattan Beach Blvd.Manhattan Beach, California
    
    90266(Address of Principal Executive Office)
    
    (Zip Code)
 (310) 318-3100
(Registrants Telephone Number, Including Area Code)
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### 



SKECHERS U.S.A., INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (Unaudited):Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Earnings and Comprehensive Income
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    26Item 4. Controls and procedures
    
    
    27PART II  OTHER INFORMATIONItem 1. Legal proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 6. Exhibits
    
    
    29Signatures
    
    
    30EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 KECHERS U.S.A., INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
 September 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    150,980
    
    
    $
    199,516Short-term marketable securities
    
    
    
    
    
    
    104,500Trade accounts receivable, less allowances of $16,447 in 2008 and $10,284 in 2007
    
    
    212,533
    
    
    
    167,406Other receivables
    
    
    7,849
    
    
    
    10,520Total receivables
    
    
    220,382
    
    
    
    177,926Inventories
    
    
    250,070
    
    
    
    204,211Prepaid expenses and other current assets
    
    
    26,728
    
    
    
    13,993Deferred tax assets
    
    
    8,594
    
    
    
    8,594Total current assets
    
    
    656,754
    
    
    
    708,740Property and equipment, at cost, less accumulated depreciation and amortization
    
    
    133,800
    
    
    
    98,400Intangible assets, less accumulated amortization
    
    
    
    
    
    
    78Deferred tax assets
    
    
    15,981
    
    
    
    13,983Long-term marketable securities
    
    
    88,450
    
    
    
    Other assets, at cost
    
    
    19,265
    
    
    
    6,776TOTAL ASSETS
    
    $
    914,250
    
    
    $
    827,977LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Current installments of long-term borrowings
    
    
    404
    
    
    
    437Accounts payable
    
    
    177,479
    
    
    
    164,466Accrued expenses
    
    
    22,293
    
    
    
    19,949Total current liabilities
    
    
    200,176
    
    
    
    184,852Long-term borrowings, excluding current installments
    
    
    16,180
    
    
    
    16,462Total liabilities
    
    
    216,356
    
    
    
    201,314Minority interest
    
    
    2,865
    
    
    
    Commitments and contingenciesStockholders equity:Preferred Stock, $.001 par value; 10,000 authorized; none issued and outstanding
    
    
    
    
    
    
    Class A Common Stock, $.001 par value; 100,000 shares authorized; 33,317 and
32,992 shares issued and outstanding at September 30, 2008 and December 31,
2007, respectively
    
    
    33
    
    
    
    33Class B Common Stock, $.001 par value; 60,000 shares authorized; 12,802 and
12,852 shares issued and outstanding at September 30, 2008 and December 31,
2007, respectively
    
    
    13
    
    
    
    13Additional paid-in capital
    
    
    263,806
    
    
    
    258,084Accumulated other comprehensive income
    
    
    1,633
    
    
    
    14,763Retained earnings
    
    
    429,544
    
    
    
    353,770Total stockholders equity
    
    
    695,029
    
    
    
    626,663TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    914,250
    
    
    $
    827,977
  3




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SKECHERS U.S.A., INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
 (Unaudited)
(In thousands, except per share data)
 Three-Months Ended September 30,
    
    
    Nine-Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    403,159
    
    
    $
    395,033
    
    
    $
    1,142,656
    
    
    $
    1,092,140Cost of sales
    
    
    231,628
    
    
    
    223,363
    
    
    
    641,760
    
    
    
    619,403Gross profit
    
    
    171,531
    
    
    
    171,670
    
    
    
    500,896
    
    
    
    472,737Royalty income
    
    
    591
    
    
    
    998
    
    
    
    1,660
    
    
    
    3,392172,122
    
    
    
    172,668
    
    
    
    502,556
    
    
    
    476,129Operating expenses:Selling
    
    
    40,911
    
    
    
    37,657
    
    
    
    105,037
    
    
    
    105,448General and administrative
    
    
    106,462
    
    
    
    98,431
    
    
    
    304,540
    
    
    
    274,888147,373
    
    
    
    136,088
    
    
    
    409,577
    
    
    
    380,336Earnings from operations
    
    
    24,749
    
    
    
    36,580
    
    
    
    92,979
    
    
    
    95,793Other income (expense):Interest income
    
    
    1,618
    
    
    
    2,547
    
    
    
    5,911
    
    
    
    7,432Interest expense
    
    
    (1,264
    )
    
    
    (837
    )
    
    
    (3,616
    )
    
    
    (3,589
    )Other, net
    
    
    (828
    )
    
    
    298
    
    
    
    (81
    )
    
    
    129(474
    )
    
    
    2,008
    
    
    
    2,214
    
    
    
    3,972Earnings before income taxes and minority interest
    
    
    24,275
    
    
    
    38,588
    
    
    
    95,193
    
    
    
    99,765Income tax expense (benefit)
    
    
    (3,639
    )
    
    
    13,844
    
    
    
    20,175
    
    
    
    36,173Minority interest in loss of consolidated subsidiary
    
    
    (375
    )
    
    
    
    
    
    
    (756
    )
    
    
    Net earnings
    
    $
    28,289
    
    
    $
    24,744
    
    
    $
    75,774
    
    
    $
    63,592Net earnings per share:Basic
    
    $
    0.61
    
    
    $
    0.54
    
    
    $
    1.65
    
    
    $
    1.41Diluted
    
    $
    0.60
    
    
    $
    0.53
    
    
    $
    1.62
    
    
    $
    1.37Weighted average shares:Basic
    
    
    46,115
    
    
    
    45,721
    
    
    
    46,000
    
    
    
    45,095Diluted
    
    
    46,835
    
    
    
    46,654
    
    
    
    46,770
    
    
    
    46,769Comprehensive income:Net earnings
    
    $
    28,289
    
    
    $
    24,744
    
    
    $
    75,774
    
    
    $
    63,592Unrealized loss on marketable securities, net of tax
    
    
    (1,496
    )
    
    
    
    
    
    
    (5,402
    )
    
    
    Gain (loss) foreign currency translation adjustment,
net of tax
    
    
    (8,618
    )
    
    
    3,261
    
    
    
    (7,728
    )
    
    
    2,359Total comprehensive income
    
    $
    18,175
    
    
    $
    28,005
    
    
    $
    62,644
    
    
    $
    65,951
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SKECHERS U.S.A., INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 Nine-Months Ended September 30,2008
    
    
    2007Cash flows from operating activities:Net earnings
    
    $
    75,774
    
    
    $
    63,592Adjustments to reconcile net earnings to net cash provided by operating activities:Minority interest
    
    
    (756
    )
    
    
    Depreciation and amortization of property and equipment
    
    
    12,855
    
    
    
    12,499Amortization of deferred financing costs
    
    
    
    
    
    
    95Amortization of intangible assets
    
    
    120
    
    
    
    322Provision for bad debts and returns
    
    
    8,617
    
    
    
    3,197Tax benefits from stock-based compensation
    
    
    561
    
    
    
    3,130Non-cash stock compensation
    
    
    1,698
    
    
    
    874Loss on disposal of equipment
    
    
    1,525
    
    
    
    248(Increase) decrease in assets:Receivables
    
    
    (55,234
    )
    
    
    (30,140
    )Inventories
    
    
    (46,762
    )
    
    
    14,313Prepaid expenses and other current assets
    
    
    (13,891
    )
    
    
    (3,020
    )Other assets
    
    
    (12,753
    )
    
    
    (1,505
    )Increase (decrease) in liabilities:Accounts payable
    
    
    11,354
    
    
    
    (34,735
    )Accrued expenses
    
    
    2,265
    
    
    
    (8,280
    )Net cash provided (used in) by operating activities
    
    
    (14,627
    )
    
    
    20,590Cash flows used in investing activities:Capital expenditures
    
    
    (47,802
    )
    
    
    (26,199
    )Purchases of investments
    
    
    (11,725
    )
    
    
    (160,050
    )Maturities of investments
    
    
    20,375
    
    
    
    116,975Net cash used in investing activities
    
    
    (39,152
    )
    
    
    (69,274
    )Cash flows from financing activities:Net proceeds from the issuances of stock through employee stock purchase plan and
the exercise of stock options
    
    
    2,903
    
    
    
    6,774Payments on long-term debt
    
    
    (315
    )
    
    
    (425
    )Contribution from minority interest holder of consolidated entity
    
    
    3,000
    
    
    
    Excess tax benefits from stock-based compensation
    
    
    559
    
    
    
    320Net cash provided by financing activities
    
    
    6,147
    
    
    
    6,669Net decrease in cash and cash equivalents
    
    
    (47,632
    )
    
    
    (42,015
    )Effect of exchange rates on cash and cash equivalents
    
    
    (904
    )
    
    
    2,688Cash and cash equivalents at beginning of the period
    
    
    199,516
    
    
    
    160,485Cash and cash equivalents at end of the period
    
    $
    150,980
    
    
    $
    121,158Supplemental disclosures of cash flow information:Interest paid
    
    $
    3,951
    
    
    $
    3,675Income taxes paid
    
    
    14,502
    
    
    
    39,701
    5




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SKECHERS U.S.A., INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008 and 2007
(Unaudited)
 (1) GENERAL
 Basis of Presentation
   Use of Estimates
  Minority interest
  Recent accounting pronouncements
 The Fair Value Option for
Financial Assets and Financial Liabilities, Including an amendment of FASB Statement No. 115
 6




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##### Table of Contents



Fair Value Measurements
 (2) INVESTMENTS
     7




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(3) REVENUE RECOGNITION
  i.e.
 (4) OTHER COMPREHENSIVE INCOME
  (5) STOCK COMPENSATION
  8




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WEIGHTED
    
    
    WEIGHTED AVERAGE
    
    
    AGGREGATEAVERAGE
    
    
    REMAINING
    
    
    INTRINSICSHARES
    
    
    EXERCISE PRICE
    
    
    CONTRACTUAL TERM
    
    
    VALUEOutstanding at December 31, 2007
    
    
    1,961,756
    
    
    $
    11.56Granted
    
    
    
    
    
    
    Exercised
    
    
    (203,311
    )
    
    
    9.06Forfeited
    
    
    (13,879
    )
    
    
    20.48Outstanding at September 30, 2008
    
    
    1,744,566
    
    
    
    11.78
    
    
    3.0 years
    
    $
    9,880,197Exercisable at September 30, 2008
    
    
    1,741,316
    
    
    
    11.78
    
    
    3.0 years
    
    $
    9,870,400
  WEIGHTED AVERAGEGRANT-DATE FAIRSHARES
    
    
    VALUENonvested at December 31, 2007
    
    
    15,167
    
    
    $
    18.32Granted
    
    
    201,546
    
    
    
    17.16Vested
    
    
    (5,501
    )
    
    
    18.86Cancelled
    
    
    (5,928
    )
    
    
    17.16Nonvested at September 30, 2008
    
    
    205,284
    
    
    
    17.20
 (6) EARNINGS PER SHARE
   Three-Months Ended
    
    
    Nine-Months EndedSeptember 30,
    
    
    September 30,Basic earnings per share
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net earnings
    
    $
    28,289
    
    
    $
    24,744
    
    
    $
    75,774
    
    
    $
    63,592Weighted average common shares outstanding
    
    
    46,115
    
    
    
    45,721
    
    
    
    46,000
    
    
    
    45,095Basic earnings per share
    
    $
    0.61
    
    
    $
    0.54
    
    
    $
    1.65
    
    
    $
    1.41
 9




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Three-Months Ended
    
    
    Nine-Months EndedSeptember 30,
    
    
    September 30,Diluted earnings per share
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net earnings
    
    $
    28,289
    
    
    $
    24,744
    
    
    $
    75,774
    
    
    $
    63,592After tax effect of interest expense on 4.50%
convertible subordinated notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    359Earnings for purposes of computing diluted
earnings per share
    
    $
    28,289
    
    
    $
    24,744
    
    
    $
    75,774
    
    
    $
    63,951Weighted average common shares outstanding
    
    
    46,115
    
    
    
    45,721
    
    
    
    46,000
    
    
    
    45,095Dilutive effect of stock options
    
    
    720
    
    
    
    933
    
    
    
    770
    
    
    
    1,193Weighted average shares to be issued assuming
conversion of 4.50% convertible subordinated
notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    481Weighted average common shares outstanding
    
    
    46,835
    
    
    
    46,654
    
    
    
    46,770
    
    
    
    46,769Diluted earnings per share
    
    $
    0.60
    
    
    $
    0.53
    
    
    $
    1.62
    
    
    $
    1.37
  (7) INCOME TAXES
    10




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(8) LINE OF CREDIT
  (9) LITIGATION
    (10) STOCKHOLDERS EQUITY
  (11) SEGMENT AND GEOGRAPHIC REPORTING INFORMATION
  11




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Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net salesDomestic wholesale
    
    $
    225,706
    
    
    $
    237,531
    
    
    $
    647,890
    
    
    $
    670,450International wholesale
    
    
    93,371
    
    
    
    75,007
    
    
    
    270,338
    
    
    
    206,338Retail
    
    
    79,275
    
    
    
    78,269
    
    
    
    211,027
    
    
    
    203,665E-commerce
    
    
    4,807
    
    
    
    4,226
    
    
    
    13,401
    
    
    
    11,687Total
    
    $
    403,159
    
    
    $
    395,033
    
    
    $
    1,142,656
    
    
    $
    1,092,140
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Gross profitDomestic wholesale
    
    $
    82,365
    
    
    $
    91,757
    
    
    $
    246,425
    
    
    $
    262,182International wholesale
    
    
    39,183
    
    
    
    29,820
    
    
    
    119,413
    
    
    
    78,713Retail
    
    
    47,897
    
    
    
    48,081
    
    
    
    128,703
    
    
    
    125,916E-commerce
    
    
    2,086
    
    
    
    2,012
    
    
    
    6,355
    
    
    
    5,926Total
    
    $
    171,531
    
    
    $
    171,670
    
    
    $
    500,896
    
    
    $
    472,737
 September 30, 2008
    
    
    December 31, 2007Identifiable assetsDomestic wholesale
    
    $
    701,086
    
    
    $
    629,377International wholesale
    
    
    127,332
    
    
    
    118,195Retail
    
    
    85,477
    
    
    
    80,250E-commerce
    
    
    355
    
    
    
    155Total
    
    $
    914,250
    
    
    $
    827,977
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Additions to property and equipment (in thousands):Domestic wholesale
    
    $
    7,209
    
    
    $
    3,153
    
    
    $
    30,938
    
    
    $
    10,865International wholesale
    
    
    1,306
    
    
    
    435
    
    
    
    2,041
    
    
    
    1,168Retail
    
    
    1,449
    
    
    
    5,309
    
    
    
    14,823
    
    
    
    14,166Total
    
    $
    9,964
    
    
    $
    8,897
    
    
    $
    47,802
    
    
    $
    26,199
   Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales (1)United States
    
    $
    302,959
    
    
    $
    313,312
    
    
    $
    852,913
    
    
    $
    868,478Canada
    
    
    12,350
    
    
    
    11,877
    
    
    
    36,654
    
    
    
    30,662Other international (2)
    
    
    87,850
    
    
    
    69,844
    
    
    
    253,089
    
    
    
    193,000Total
    
    $
    403,159
    
    
    $
    395,033
    
    
    $
    1,142,656
    
    
    $
    1,092,140
 12




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September 30, 2008
    
    
    December 31, 2007Long-lived assetsUnited States
    
    $
    131,096
    
    
    $
    96,044Canada
    
    
    168
    
    
    
    343Other international (2)
    
    
    2,536
    
    
    
    2,013Total
    
    $
    133,800
    
    
    $
    98,400
 
 (1)
    
    The Company has subsidiaries in Canada, United Kingdom, Germany, France, Spain, Italy,
Netherlands, Brazil, Thailand and Malaysia that generate net sales within those respective
countries and in some cases the neighboring regions. The Company has a joint venture in China
that generates net sales from that country. The Company also has a subsidiary in Switzerland
that generates net sales to that region in addition to net sales to our distributors located
in numerous non-European countries. Net sales are attributable to geographic regions based on
the location of the Company subsidiary.(2)
    
    Other international consists of Switzerland, United Kingdom, Germany, France, Spain, Italy,
Netherlands, Brazil, Thailand, Malaysia, and China. (12) BUSINESS AND CREDIT CONCENTRATIONS
     13




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14




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     15




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Three-Months Ended September 30,2008
    
    
    2007Percentage of revenues by segmentDomestic wholesale
    
    
    56.0
    %
    
    
    60.1
    %International wholesale
    
    
    23.1
    %
    
    
    19.0
    %Retail
    
    
    19.7
    %
    
    
    19.8
    %E-commerce
    
    
    1.2
    %
    
    
    1.1
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
   16




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Three-Months Ended September 30,
    
    
    Nine-Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    403,159
    
    
    
    100.0
    %
    
    $
    395,033
    
    
    
    100.0
    %
    
    $
    1,142,656
    
    
    
    100.0
    %
    
    $
    1,092,140
    
    
    
    100.0
    %Cost of sales
    
    
    231,628
    
    
    
    57.5
    
    
    
    223,363
    
    
    
    56.5
    
    
    
    641,760
    
    
    
    56.2
    
    
    
    619,403
    
    
    
    56.7Gross profit
    
    
    171,531
    
    
    
    42.5
    
    
    
    171,670
    
    
    
    43.5
    
    
    
    500,896
    
    
    
    43.8
    
    
    
    472,737
    
    
    
    43.3Royalty income
    
    
    591
    
    
    
    0.2
    
    
    
    998
    
    
    
    0.2
    
    
    
    1,660
    
    
    
    0.2
    
    
    
    3,392
    
    
    
    0.3172,122
    
    
    
    42.7
    
    
    
    172,668
    
    
    
    43.7
    
    
    
    502,556
    
    
    
    44.0
    
    
    
    476,129
    
    
    
    43.6Operating expenses:Selling
    
    
    40,911
    
    
    
    10.2
    
    
    
    37,657
    
    
    
    9.5
    
    
    
    105,037
    
    
    
    9.2
    
    
    
    105,448
    
    
    
    9.7General and administrative
    
    
    106,462
    
    
    
    26.4
    
    
    
    98,431
    
    
    
    24.9
    
    
    
    304,540
    
    
    
    26.6
    
    
    
    274,888
    
    
    
    25.1147,373
    
    
    
    36.6
    
    
    
    136,088
    
    
    
    34.4
    
    
    
    409,577
    
    
    
    35.8
    
    
    
    380,336
    
    
    
    34.8Earnings from operations
    
    
    24,749
    
    
    
    6.1
    
    
    
    36,580
    
    
    
    9.3
    
    
    
    92,979
    
    
    
    8.2
    
    
    
    95,793
    
    
    
    8.8Interest income, net
    
    
    354
    
    
    
    0.1
    
    
    
    1,710
    
    
    
    0.4
    
    
    
    2,295
    
    
    
    0.2
    
    
    
    3,843
    
    
    
    0.3Other, net
    
    
    (828
    )
    
    
    (0.2
    )
    
    
    298
    
    
    
    0.1
    
    
    
    (81
    )
    
    
    
    
    
    
    129
    
    
    
    Earnings before income taxes
    
    
    24,275
    
    
    
    6.0
    
    
    
    38,588
    
    
    
    9.8
    
    
    
    95,193
    
    
    
    8.4
    
    
    
    99,765
    
    
    
    9.1Income taxes (benefit)
    
    
    (3,639
    )
    
    
    (0.9
    )
    
    
    13,844
    
    
    
    3.5
    
    
    
    20,175
    
    
    
    1.9
    
    
    
    36,173
    
    
    
    3.3Minority interest in loss of
consolidated subsidiary
    
    
    (375
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    (756
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    Net earnings
    
    $
    28,289
    
    
    
    7.0
    %
    
    $
    24,744
    
    
    
    6.3
    %
    
    $
    75,774
    
    
    
    6.6
    %
    
    $
    63,592
    
    
    
    5.8
    %
  Net sales
    17




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Gross profit
     18




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Selling expenses
   General and administrative expenses
   Interest income
  Interest expense
  Income taxes
  19




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Minority interest in net loss of consolidated subsidiary
   Net sales
     20




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Gross profit
    Selling expenses
  General and administrative expenses
  21




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Interest income
  Interest expense
  Income taxes
   Minority interest in net loss of consolidated subsidiary
    22




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23




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24




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The Hierarchy of Generally Accepted Accounting
Principles . The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles
 Disclosures about Derivative Instruments and
Hedging Activities Accounting for Derivative Instruments and Hedging Activities
 Accounting for Noncontrolling Interests
 Applying the Acquisition Method
   25




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   Interest rate fluctuations
 26




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Foreign exchange rate fluctuations
  
 ITEM 4. CONTROLS AND PROCEDURES
        27




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  We depend upon a relatively small group of customers for a large portion of our sales.
  We rely on independent contract manufacturers and, as a result, are exposed to potential
disruptions in product supply.
  28




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One principal stockholder is able to control substantially all matters requiring a vote of our
stockholders and his interests may differ from the interests of our other stockholders.
  
 ITEM 6. EXHIBITS
 ExhibitNumber
    
    Description31.1
    
    
    Certification of the Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of the Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of the Chief Executive Officer and the Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ***
 
 ***
    
    In accordance with Item 601(b)(32)(ii) of Regulation S-K, this exhibit shall not be deemed
filed for the purposes of Section 18 of the Exchange Act or otherwise subject to the
liability of that section, nor shall it be deemed incorporated by reference in any filing
under the Securities Act of 1933, as amended, or the Exchange Act. 29




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SIGNATURES
  Date: November 7, 2008
    SKECHERS U.S.A., INC.By:
    /S/ FREDERICK H. SCHNEIDERFrederick H. SchneiderChief Financial Officer
(Principal Financial and Accounting Officer) 30